Element Financial Will Offer Aggressive Lending Program
By Daniel P. Bearth, Staff Writer
This story appears in the Aug. 18 print edition of Transport Topics. With the recent $1.4 billion purchase of PHH Arval, a top executive at Element Financial Corp. said the Toronto-based company is ready to roll out an aggressive lending program for truck, air and rail transportation operators as well as commercial equipment dealers and suppliers in North America.
“The strategy is to become the market leader in each of those verticals,” Steve Grosso, president and chief operating officer of Element Financial (USA), said in a recent interview with Transport Topics.
To reach that goal, Element has been acquiring businesses at a rapid clip, including the Canadian fleet assets of GE Capital Fleet Services in June 2013 and the assets of Bush Truck Leasing, a Cincinnati-based company specializing in financing vehicles for parcel delivery contractors and other vocational truck operators in September 2013.
The purchase of PHH Arval, the fleet management business of PHH Corp., in July boosted Element’s total assets to $10 billion and doubled the size of its portfolio of fleet assets to $6 billion.
The deal also added about $4 billion in net investments in fleet leases to Element’s balance sheet, giving the company the means to secure $1.1 billion in new capital to fund additional growth and to pursue acquisitions.
Jerry Parrotto, editor of Monitor Daily, a publication that closely tracks equipment finance and leasing companies in the United States, said Element is one of a number of new lenders coming into a market in which some recoveries ran their course in just a few years. “We still have a ways to go with this recovery.”
Trucking is reaping the benefits of the recovery, Costello noted, even though it hasn’t been as strong as many have hoped.
“More growth and better growth are coming,” Costello said. “Things are looking up.”
Specifically, he said, retail sales are expected to rise 4.2% this year and 4.5% next year, providing much of the impetus for a stronger trucking market. Manufacturing growth of 3.5% this year and next also will help, he said.
Costello sounded a note of caution about the housing market, where expected home starts of 1.07 million this year would be the most since 2007. The issue, he said, is that level of home building matches the trough of past cycles. The era of 2 million new starts seen in the past decade won’t be repeated, he said.
In the first half, Costello said, the better economy produced less-than-truckload freight volume growth of 8.4%, besting truckload as a group, which increased 3.7%.
Temperature-controlled freight rose 6.2% in the second quarter, he said, cautioning that trends in that sector were the most volatile in the industry.
Flatbed freight volume dropped 3.6% in the second quarter, and tank truck freight rose 3.2% after the first quarter, when shipments barely rose due to inclement weather.
On the positive side, he noted that average revenue per mile is rising, particularly for the flatbed sector, where the most significant capacity reductions have led to a 9.6% revenue-per-mile increase.
Costello reiterated concerns about capacity, driver issues and rising costs.
“We know carriers are struggling to expand due to the driver shortage,” he said.
The situation is more severe for small truckload carriers, whose capacity has been shrunk 7.4% in two years. Overall, truckload capacity is down 3.4% this year.
High costs, such as for drivers and fuel, continue to affect fleet profitability, he added.
Driver costs remain high, he said, despite a long-term drop in miles driven from about 10,000 monthly before the recession.
On average, drivers ran 7,962 miles in the first half of 2014, down from 8,066 last year but better than the 7,752-mile average in 2012, he said.
